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Biggest Lie of 2012: “High Tech Worker Shortage” is a Myth

by Darwin on May 30, 2012

I usually voice my support for business issues and call BS on pandering politicians shaking down businesses for more tax money, regulations and general class warfare. However, I’ve also got to call BS when I see it when the mainstream media keeps purporting that businesses just can’t get enough high skilled workers to run their businesses. That is a lie. Read what you hear in the media and then the next line which is the truth:

Media/Business Message: “There are not enough highly skilled workers to run our business.”Truth: “There are not enough highly skilled workers to run our business at the wages we want to pay them.“

While you can find a regurgitation of the same article practically daily, the latest anecdote-filled article from CNBC portrays a bunch of tech companies that just can’t get enough skilled workers to run their everyday operations. Just as there’s no such thing as 0% unemployment (wage rates would always continue to rise asymptotically to prevent total unemployment in a tight job market), there is no such thing as a shortage of any particular skill set if you’re willing to pay the market rate. See how that works? While it’s not always like flipping a switch overnight, if wages rise high enough, talent will flock to particular sectors chasing high wages. We’ve seen this in virtually every field. This is why non-degreed trades can make 6-figures on oil rigs, contractors were getting 6 figures to work in Iraq and Facebook has no trouble hiring talent.

If the package is sweet enough, the candidates will fill the roles. The problem with many businesses today is that they find they can’t fill these roles at the “typical” wage rates they want to. Well, that’s life! Just like a business can lay off as many workers as they want when business is lean, they must also pay up when talent is in demand, no?

Enter the Immigrants

No, this is not a xenophobic knock on immigration. In fact, I’m a huge proponent of LEGAL immigration, especially with high skill sets (there used to actually be a time in America where you needed a skill to enter our country). Innovation and leading edge product development and services is what sets America apart from the rest of the world despite our best efforts to cripple ourselves (criticism). Given our country’s runaway debt obligations and slow economy elsewhere, immigration is going to help drive GDP, help pay for the unsustainable commitments we’ve made through Social Security, and many other untold benefits. However, what business wants is the ability to import as many immigrants as they like on various work visas to essentially artificially suppress the wage rates. Again, while I can empathize with a business looking to keep costs down, let’s just call it what it is – this is a wage issue, not a skills issue. There are a few very easy solutions to this problem which businesses don’t appear to be pursuing:

Increase Compensation – This is the obvious solution that companies don’t seem willing to undertake. Let’s say the starting salary for a Java programmer is $90,000. That sounds shockingly high. As such, there are more kids now pursuing that kind of curriculum (or switching from other tech skills into Java) than perhaps their prior trajectory. Well, if the average starting salary were $150,000 (which may well be the true market rate to supply all open positions), then a heck of a lot MORE people would be flocking to that skill set. Companies shoot themselves in the foot. They artificially suppress the wage rates of in-demand skill sets hoping to manipulate immigration laws and then complain about the pain they’re enduring rather than doing something about it!

Stop Hiring in California – Sure, California is the hub for all things tech, but if you wanna play, you gotta pay! If you want to keep someone in the hottest job market in the highest cost of living area around from leaving your company, you have to pay them a ton (or import immigrants to do the work). How about just having some sites in the midwest or even overseas where the wage rates are lower, local universities can supply a constant flow of graduates and you’re not competing with any other companies? The CNBC article sited a few companies doing that, but it’s obviously not happening for the vast majority of companies in Bubble, CA.

Allow Remote Work – Similar to putting sites outside California, more companies should just let people work out of their homes anywhere in the country. I find it to be hard to believe that in IT, social media, software engineering, etc., that you MUST be in the office all the time. I have a family member who works for Oracle and they have virtually nobody working in an office; practically the whole company works remote. Why the heck do you need a guy in front of a computer with headphones in San Francisco everyday instead of out of his basement in Texas? This would greatly increase the number of willing candidates and entice people to leave other professions to pursue areas of high demand.

Outsource More – I also find it ironic that companies want to import millions of immigrants into the US to write code but they can’t just outsource the same work to the same countries they’re importing labor from. This makes no sense. Security? You have the same risk here as you do anywhere else. Reputable firms overseas have the same measures in place the US does and I’d argue US companies face just as high a risk due to complacency. Anyone here in the US could easily upload info off a thumb drive, laptop, server or whatever other info they can access compared to outsourcing. Why not just outsource some of this work?

Train Your Own Workers – This one takes a little foresight and effort as well, but companies could solve many of their worker shortages by simply cross-training or even starting apprenticeships and schooling for some of their existing workers – even interns that go full-time with an intense training session.

The bottom line is that fast growing businesses want to have their cake and eat it too. They want to enjoy above-average growth rates while paying below average wage rates to workers. Now I’m starting to sound like a union organizer LOL. But seriously, the sooner we start calling it what it is, the more quickly we can focus on an efficient market.

Based on the title of your post which I found while searching this topic on Google, my gut instinct was to disagree with your premise (or, at least your title).

After reading your post, I am in agreement with you. Perhaps a better title would be “The Great Self-Imposed Developer Shortage” or something to that effect. There IS a shortage, but it’s a shortage because they’re not recognizing the reality of the situation.

The major factor here is “demand”. Five years ago, the iPhone didn’t exist. Facebook existed but was not yet “popular”. Since then, Android, Twitter have appeared on the scene.

Every company wants an app. Every company wants to integrate with social networking sites somehow. By “every”, I mean, many, many, many, not literally “every”.

So, in the course of five years, demand for developers has skyrocketed to meet the demands of business models and platforms that literally did not exist five years ago. In the mean time, there have been five years of developers retiring or becoming managers or “analysts”, or changing careers because a few are stubborn old-timers who can’t figure out why they can’t get a job when they’re the best damn RPGIII programmer in five states…

Add to this….*professional* software development is DIFFICULT. If ANYBODY could do this work, there’d be no shortage. You don’t think TONS of people would love to make $80,000 or $90,000 per year. Of course they would! But they can’t do the work. And so, fewer and fewer people get into software development.

When you add a dwindling supply (fewer students, retirees, transfers) with exploding demand (new platforms, business models… and all of the “legacy” computing is still here, needing to be maintained), what you get is…well…what you get is what we have. I agree… STARTING salaries should be well over $100K and/or there MUCH more remote work. That the people who work in technology don’t understand the relief offered by remote work is comically sad.

You are wrong. go stand outside any community college on graduation day, go stand outside any vocational school teaching IT/ computer skills on graduation day.
go stand outside any high school that offers advanced computer skill classes on graduation day, and you will see how blind to reality you are. there IS NOT A SHORTAGE OF SKILLED WORKERS FOR THE IT/ COMPUTER FIELD IN THE UNITED STATES! period. these corporations are greedy evil pathetic entities, trying to squeeze a penny out of every nook and cranny of their devilsh empires, for the ‘stock holders’. I pray you get an education in reality soon……

I also think that the ways companies compensate in the software industry is somewhat BS, with more productive getting paid the same as less productive, but more senior. However, I think this is somewhat compensated by the fact that employees have very high mobility, and can easily switch firms.

Until a company is willing to pay me adequate compensation for making me sit in an office, I’m happy to be an independent worker, even if it means I make a bit less. 😉

A stockbroker who brings in $3 million for his company gets paid $1 million.
A movie start who brings in $300 millon for the studio gets paid $20 million
A star baseball player who brings in $100 million for the franchise gets paid $40 million
But a start programmer working 16 hour days for months whose creation brings in $5-$20 million for his employer?

Because they know you only want cheap foreign labor and are afraid of American workers who are smarter than you. We have 40 million unemployed Americans in this country. Do you really expect us to believe out of 40 million people you cannot find the programmer you need?

I strongly disagree with the premise that there is NO tech worker shortage in the U.S. There most certainly is. If you’re not the person charged with hiring skilled Rails developers, not the person trying to hire an Android developer, then you are not seeing what’s happening. I live it every day.

I run a recruiting and staffing firm in San Francisco, Chicago, and New York, focused on certain tech workers such as web and mobile developers, software engineers, user experience architects. I’ve witnessed the increasing demand for these types of workers over the years. I’ve been working with companies who need tech employees since the days of the first web boom, in the late 90’s. I can attest to the huge increase in hiring demands, with the last 5 years showing the most increase.

America used to have valuable apprenticeship programs for ‘home-growing’ skilled workers (like tool and die makers). How many formal apprenticeship programs do you know of today? I thought so. I’m not talking about internships here, which are in abundance because companies can pay interns nothing or minimum wage. I’m talking about 12 to 36 month programs where a worker would be paid a living wage while in training and then have a good career with that employer.

Now tell me how many of the few apprenticeship programs we do have, are geared for training workers in software or web or mobile development?

So as it stands right now, the demand for workers skilled in designing and programming software, web sites, and mobile apps has increased 100-fold, but the workforce has not kept pace.

Some people say our universities need to train future tech workers. But our colleges are not trade schools and graduating students don’t come out of them with real-world skills (try to find classes in Ruby on Rails, or Agile Development, or Cocoa in a college). If they try to keep up with technology and job trends, it takes them years to change curriculum and degree programs, and by then a new technology is out there. So America cannot rely on getting skilled workers from our colleges.

Today there is a VERY real shortage of skilled tech workers. Salaries are going through the roof. How would you have liked to earn $95K a year when you were 27 years old? I just placed someone that age at that salary. Benefit packages and perks are getting outrageously generous. And then there are the thousands of skilled tech workers leaving the workforce to start their own technology business, or become self-employed independent contractors (freelancers). After, it’s very appealing to a 20-something to be paid $100 an hour, take a month off, then accept another contract gig. These contractors are not lacking for business.

Companies today are fighting over the same pool of skilled talent, and tech jobs are often a revolving door toward the next best job, so much so that it is now understood that the employee you just hired may only spend 1 or 2 years with you, and then move on to the next highest bidder or to become self-employed.

So yes, offering higher salaries and benefits have made some companies temporarily happy because they finally got the skilled worker they needed. But what good is it to keep raising salaries if we’re still short of people?

There is no feasible plan in place in the U.S. today to ‘grow’ or train the workers we need in the tech industry. If businesses cannot or will not train their own workers internally, they will outsource their tech jobs overseas, or they will clamor to allow more foreign workers into the U.S.

Frankly, $95K at 27 in Silicon Valley is not very impressive at all. Try paying $150K and people will quickly start shifting into those skills. Sure, it may take a while to fill the pipeline, but talent always flocks to high salaries. Why do you think the best and brightest mathematicians, programmers, physicists and engineers all went to work on Wall Street over the prior decade? They could have taken government jobs, become researchers, worked in pharma or virtually any industry, but they went to a seemingly unrelated field – finance?! Because they can make $300K-$500K with their eyes closed and over $1 Million by the time they’re 30 if they’re a good trader.

I still contend this is a pay issue. The free market will always eventually fill the gap but it irks companies to no end that they have to pay what they feel are outrageous salaries. They want the skills you seek for $80K a year. That’s just not a lot of money in tech, especially considering cost of living.

I can’t speak for those mathematicians, programmers, physicists, etc. who went into finance, but I can tell you about software/web/mobile programmers. The rise of digital commerce and marketing has happened SO fast, that of course we don’t have enough ‘experienced’ people to fill the open jobs today.

No one was prepared for the changes over the last decade. And of course there are some larger employers (like Microsoft) who probably do balk at paying a web developer $150K when all the other web developers they employ are making $100K. That’s a standard HR problem; how to have a team of happy workers if they find out one or some of them are being paid a lot more than they are.

But that’s NOT true of the thousands of firms we work with, who tend to be small to mid-size companies. They are the ones who may only need to hire ONE developer or programmer, but their ability to do their business and make money hinges on that one person. Those are the companies that are hurting, and they will pay just about anything to get one of those people away from the ‘big, sexy’ technology companies like Microsoft, Facebook, Google, LinkedIn, Apple, etc. But the finite group of experienced developers often prefer to take full-time jobs with those biggies instead of a small company, so the small employer struggles.

Diane Feinstein herself said L-1 visa holders, which the Indian bodyshops are importing by the millions PAY NO TAXES. In 1998 when Americans ran the tech industry, the US had a massive FEDERAL SURPLUS. Take all those high-paid jobs Americans had, gut them, cut the wages down to $40K a year, or give them to L-1s who PAY NO TAXES and voila! Instant deficits! The fact is bankers like Bloomberg, et al NEED big deficits and low wages in order for gov’t and people to not be able to pay their debt off. Remember back in the 90s when Americans were paying CASH for cars and houses? BAM! The bankers are not going to stand for that. And now with the new mobile and social booms, the BANKERS are once again afraid too many Americans will work in these jobs and GET RID OF THEIR DEBT.

That and the fact that the bankers are using India to destroy the US IT industry because an information system the elites cannot control is a threat to them.

This sounds weird. The IRS has strict rules about who pays taxes. L-1 visa holders are non-immigrants when it comes to immigration status. Yet they are US residents when it comes to paying taxes, and they pay the same rates for Fed. and state as US citizens.
I know there are certain J-1 visa holders that are exempt from Fed. taxes thanks to tax treaties, but these are short term interns/traines/grant workers etc.

P.S. I just checked with Sen. Feinstein’s office, they could not find any statement that she made in which she said (something like) this.

Doesn’t matter how it “sounds”. It’s a fact and even DiFi admitted it’s happening. The Internal Revenue Code says L-1 visa holders don’t taxes on what they earn. It’s the law. L-1s pay no Federal income taxes. DiFi said this about 10 years ago. I guess you are too young to even know history or what has been going on for the past 15 years. Trust me, she said it, I’ve been following this issue since 1998. How old are you do you even know that once upon a time the US IT industry was 98% Americans? Google “Immigration, Science and Technology by James M. Gentile” at Huff Post. It’s all right there in B&W.

Sen. Dianne Feinstein has been one of the staunchest supporters of H-1B
over the years. Feinstein worked with Sen. Spencer Abraham and the
Senate Judiciary Committee on S. 1723 to double the H-1B cap in 1998.
She voted with the 12-6 majority to send the bill to the floor of the
Senate without safeguards for American workers. Even worse, Feinstein
co-sponsored the 2000 H-1B bill in the Senate in 2000 that increased
the yearly cap to 195,000.

With her past history in mind, she surprised everyone when she voted
against the Chile and Singapore FTA in the Senate Judiciary committee.
Unfortunately it still passed by 11-4 but she had a chance to speak out
against the visa aspects of the bill.

Now Feinstein is speaking out against H-1B and L-1 visa! In a Senate
hearing on Tuesday Feinstein said that she had been deceived by the
industry lobbyists on H-1B. That statement is a stunning turnabout in
her attitude even though it’s a real stretch to believe that she didn’t
know exactly what she was doing.

Feinstein probably sees a political change in California and wants to
jump aboard before it’s too late. She may be changing her mind on
nonimmigrant visas so she should be encouraged to stay on the right
track.

Since Feinstein is now an advocate for American workers, she should be
encouraged to sponsor DeLauro’s L-1 reform bill HR2702 in the Senate.

Now, I appreciate global competition. I come from a State
that is a high-cost State, and the American dream has always
been for a worker to be able to own a home and buy a car and
educate their kids, and it is very hard to do it on $32,000
paying taxes. Now we are going to have $32,000 and no taxes. I
really think to have workers that are able to come into this
country–and that is the second part of the L program, the L-
1B–and be here for 7 years and pay no taxes and replace
American workers, that is not something I want to be a part of.
I come from the State that has the biggest, I guess, technology
industry, and I would hope that computer firms and chip firms
and others in my State would not do that.

Adaptec – Indian CEO Subramanian Sundaresh fired.
AIG (signed outsourcing deal in 2007 in Europe with Accenture Indian frauds, collapsed in 2009)
AirBus (Qantas plane plunged 650 feet injuring passengers when its computer system written by India disengaged the auto-pilot).
Apple – R&D CLOSED in India in 2006.
Australia’s National Australia Bank (Outsourced jobs to India in 2007, nationwide ATM and account failure in late 2010).
Bell Labs (Arun Netravalli took over, closed, turned into a shopping mall)
Boeing Dreamliner ES software (written by HCL, banned by FAA)
Bristol-Myers-Squibb (Trade Secrets and documents stolen in U.S. by Indian national guest worker)
Caymas – Startup run by Indian CEO, French director of dev, Chinese tech lead. Closed after 5 years of sucking VC out of America.
Caterpillar misses earnings a mere 4 months after outsourcing to India, Inc.
Circuit City – Outsourced all IT to Indian-run IBM and went bankrupt shortly thereafter.
ComAir crew system run by 100% Indian IT workers caused the 12/25/05 U.S. airport shutdown when they used a short int instead of a long int
Deloitte – 2010 – this Indian-packed consulting company is being sued under RICO fraud charges by Marin Country, California for a failed solution.
Dell – call center (closed in India)
Delta call centers (closed in India)
Fannie Mae – Hired large numbers of Indians, had to be bailed out. Indian logic bomb creator found guilty.
GM – Was booming in 2006, signed $300 million outsourcing deal with Wipro that same year, went bankrupt 3 years later
HSBC ATMs (software taken over by Indians, failed in 2006)
Intel Whitefield processor project (cancelled, Indian staff canned)
Lehman (Spectramind software bought by Wipro, ruined, trashed by Indian programmers)
Medicare – Defrauded by Indian national doctor Arun Sharma & wife in the U.S.
Microsoft – Employs over 35,000 H-1Bs. Stock used to be $100. Today it’s lucky to be over $25. Not to mention that Vista thing.
MIT Media Lab Asia (canceled)
PeopleSoft (Taken over by Indians in 2000, collapsed).
PepsiCo – Slides from #1 to #3 during Indian CEO Indra Nooyi’ watch.
Polycom – Former senior executive Sunil Bhalla charged with insider trading.
Qantas – See AirBus above
Quark (Alukah Kamar CEO, fired, lost 60% of its customers to Adobe because Indian-written QuarkExpress 6 was a failure)
Rolls Royce (Sent aircraft engine work to India in 2006, engines delayed for Boeing 787, and failed on at least 2 Quantas planes in 2010, cost Rolls $500m).
SAP – Same as Deloitte above in 2010.
Skype (Madhu Yarlagadda fired)
State of Indiana $867 million FAILED IBM project, IBM being sued
State of Texas failed IBM project.
Sun Micro (Taken over by Indian and Chinese workers in 2001, collapsed, had to be sold off to Oracle).
UK’s NHS outsourced numerous jobs including health records to India in mid-2000 resulting in $26 billion over budget.
Union Bank of California – Cancelled Finacle project run by India’s InfoSys in 2011.
United – call center (closed in India)
Victorian Order of Nurses, Canada (Payroll system screwed up by SAP/IBM in mid-2011)
Virgin Atlantic (software written in India caused cloud IT failure)
World Bank (Indian fraudsters BANNED for 3 years because they stole data).

Mr.Wakjob,
When Companies ruined by imported Indian labor, why are they still hiring/importing Indians? they want to ruin their own business?
Just imagine, if all indians disappear from US what would happen?